This paper deals with a mean–variance optimal portfolio selection problem in presence of risky assets characterized by low-frequency trading and, therefore, low liquidity. To model the dynamics of illiquid assets, we introduce pure-jump processes. This leads to the development of a portfolio...

This work deals with the issue of investors’ irrational behavior and financial products’ misperception. The theoretical analysis of the mechanisms driving erroneous assessment of investment performances is explored. The study is supported by the application of Monte Carlo simulations to the...

<font size="2" face="CMR10"><font size="2" face="CMR10">In this paper we propose an exchange rate model as solution of a disutility based drift control problem. Assuming the exchange rate is a function of the fundamental, we suppose that Government Authorities control the fundamental's dynamics aimed at minimizing thediscounted expected disutility...</font></font>

In this work we propose a simple market model where some features of the Specialist System are analyzed. In particular, the specialist's obligation to display bid/ask quotes on the book within the bounds imposed by the Exchange is considered. The proposed model allows to analyze the effects of...

This work deals with the problem of investors' irrational behavior and financial products' misperception. The theoretical analysis of the mechanisms driving wrong evaluations of investment performances is explored. The study is supported by the application of Monte Carlo simulations to the...

 Hidden Markov Models can be considered an extension of mixture models, allowing fordependent observations. In a hierarchical Bayesian framework, we show how ReversibleJump Markov Chain Monte Carlo techniques can be used to estimate the parameters of amodel, as well as the number of regimes. We...

Classical methods for computing the value-at-risk(VaR) do not account for the large price variations observed in financial markets. The historical method is subject to event risk and may miss some fundamental market evolution relevant to VaR; the variance/covariance method tends to underestimate...

Since 1973 currency market has been dominated by US-Dollar cycles, the so called long swings. The long swinging behaviour of the dollar has been confirmed also by its strong depreciation against the Euro, registered in the last three years. Periods of steady appreciation followed by period of...

As outlined by many authors, the methods to compute the Value at Risk (VaR) based on the classical approach do not take into account the very large price variations observed in financial markets. The historical method is subject to event risk, and it may miss some fundamental evolution of the...

<span style="font-size: 9.5pt"><span style="font-size: 9.5pt">This paper presents a new stochastic model of asset pricing, based on agents with heterogeneous beliefs. Forecasting rules of all agents are characterized by a stochastic term that</span><span style="font-size: 9.5pt">works as an agent-based time dependent weight of the conditional expectation of the fundamental. Since we consider...</span></span>